New Medicare model may improve care, cost for knee, hip surgeries

A new model of Medicare reimbursement for hip and knee replacements surgeries goes into effect today, with the goal of improving care while lowering cost.

The Centers for Medicaid and Medicare Services will now require Medicare providers to meet certain requirements for the procedures, and those whose patients have better recoveries stand to receive additional payments.

Knee and hip replacements are the most common procedures Medicare beneficiaries undergo, with about 400,000 surgeries performed in 2014 at a cost of $7 billion.

The goal of the new bundled payment model is to make hospitals more accountable, as infections and implant failures can range as high as three times more common at some facilities. The average cost for the full procedure — surgery, hospitalization and recovery — can range between $16,500 and $33,000 depending on the hospital and its location.

A major key is giving hospitals a financial incentive to work more closely with the doctors, home healthcare providers, nursing facilities and other care providers to coordinate how best to serve a patient’s needs. If done properly, this may avoid rehospitalization or other adverse events after surgery, saving time and money.

“Effective implementation of the CJR model will improve the quality and efficiency of care for Medicare beneficiaries, which is essential to creating a health care system that delivers better care, spends our dollars more wisely, and leads to healthier Americans,” the agency said in a press release.

The model will initially be implemented in 67 metro areas including some 800 hospitals, with performance goals set for each facility over the course of five years.

All care providers will be reimbursed by Medicare for services using the regular payment system. At the end of each “model year,” actual facility spending will be compared to the target price Medicare expects for the hospital. Based on the hospital’s “quality and episode performance,” the facility may either receive an additional payment or have to repay Medicare a portion of its spending.

Penalties are being phased in during the first few years, are based on location of each hospital, including no repayment for performance in the first year of the model. In year two, there will be a 5 percent repayment limit, which increases to 10 percent in year three and 20 percent in years four and five for some, but not all, facilities.

CMS says the goal of the model is to incorporate previous best practices while also incorporating private sector concepts of bundled payments for entire treatment episodes, from diagnosis and hospital admission to discharge and recovery.

“This model is about improving patient care,” Dr. Patrick Conway, principal deputy administrator and chief medical officer for CMS, said in a press release when the model was announced in November. “Patients want high quality, coordinated care — not just for a day, but for an entire episode of care. Hospitals, physicians, and other providers who work together can be successful and improve care for patients in this model, and CMS will help providers succeed.”